Brown on course to hit child poverty target

Tax breaks aimed at Britain's poorest families have put the government's target of reducing child poverty by 25% by 2004 within reach, the Institute for Fiscal Studies said yesterday.

In its examination of the pre-budget report, the independent thinktank said that the chancellor's boost to the child tax credit was "strongly redistributive".

"The money was well targeted to decrease child poverty," said Mike Brewer, a senior research economist at the IFS. "Households with high incomes will lose slightly, with those on lower incomes gaining."

Labour is committed to abolishing child poverty - defined as a child living in a household on less than 60% of average income - within a generation, and has set interim targets en route to achieving the goal set by the prime minister.

Ahead of the PBR, the IFS had warned that Mr Brown would struggle to hit the first interim target unless he made the child tax credit, the central plank of the government's anti-poverty strategy, more generous.

The chancellor responded by announcing that families on low incomes would receive an extra £3.50 a child per week from April next year, £2.50 more than was needed to keep pace with expected growth in average earnings.

According to the Treasury, the increase will benefit 7.2m children in 3.7m families.

Sources said that the extra cash at a time when the public finances were under strain was a sign of the chancellor's insistence - often in the face of opposition from cabinet colleagues - to press ahead with Labour's social justice agenda.

Even so, the bigger-than-expected budget deficit this year forced Mr Brown to claw back some of the £885m cost of his proposal.

The Treasury has frozen both the family element of the child tax credit, which goes to all families with incomes of less than £50,000 a year, and the income thresholds of the child and working tax credits in April next year.

The IFS said this would save £240m next year and accumulate to a saving of £1.2bn by 2008-09, by which time the value of the child tax credit would have been reduced by 13% for the better off.

Mr Brewer said: "After these changes, the government might just hit its poverty target for next year. We would say that the package is slightly less generous than it needed to be, but it is well within the margin for error."

The Treasury said families with children would be on average £1,300 a year better off in real terms by next September than they were in 1997 as a result of Labour's changes to tax and benefits.

Those in the poorest fifth of the population would be £2,900 a year better off on average, while a single-earner family on half of average earnings with two young children would have seen their income boosted by £3,750 a year.

Further anti-poverty measures were hinted at in the pre-budget report document, which said the government remained "determined to continue to make progress beyond 2004-05 and recognises that further investment and reform are needed to ensure the long-term goal of halving and eradicating child poverty are met".